August 17, 2004

The Honorable Spencer Abraham The Honorable Gregory Friedman

Secretary Inspector General

Department of Energy Department of Energy

Forrestal Building, Room 7Bl38 1000 Independence Avenue, S.W

1000 Independence Avenue, SW Room 5D039

Washington, DC 20585-0800 Washington, D.C. 20585

The Honorable Stephen Perry The Honorable Daniel R. Levinson

Administrator Inspector General

General Services Administration General Services Administration

1800 F Street, NW 18th and F Streets, NW

Room 6105 Room 5340

Washington, DC 20405 Washington, DC 20405

Dear Secretary Abraham, Inspector General Friedman, Administrator Perry and Inspector General Levinson:

I am writing to you to inquire and express concern about improper contracting problems and irregularities – and the resulting consequences and remedies – that are associated with a continuing disservice to thousands of sick former nuclear weapons plant workers who are awaiting workers’ compensation from a United States government program.

Specifically, the General Services Administration Office of Inspector General (GSA OIG) has concluded (see attached) that a contractor for the Energy Department’s (DOE) implementation of Subtitle D of Energy Employees Occupational Illness Compensation Program Act (EEOICPA) conducted tax-payer funded services that were outside the scope of its contract with the government.

The contractor is Apogen Technologies, formerly known as Science & Engineering Associates, of New Orleans, La. The company changed its name after a March 30, 2004 hearing of the Senate Committee on Energy and Water, but for reference purposes will be referred to as “SEA/Apogen” in this letter. The work of this contractor is tremendously important. In accordance with EEOICPA, it is processing on behalf of DOE nearly 25,000 claims filed by sick nuclear weapons workers to assist them in obtaining workers’ compensation.

Congress passed EEOICPA in 2000 in recognition of the sacrifice of these workers during the Cold War, many of whom were exposed to radiation and toxic substances without their knowledge or consent. In my state of Iowa, hundreds of these workers are ill, and for those who have died, their survivors are suffering, because an inattentive, slothful government and an underperforming contractor won’t or can’t help them.

As you may know, DOE’s implementation of EEOICPA has been plagued by self-inflicted problems, and is, by all accounts, a disgrace. Despite receiving $95 million in appropriations, DOE and SEA/Apogen have only processed 4% of the caseload through the physicians panels, and a mere 31 claims have been paid in nearly four years since the last was first enacted. This is the disservice I speak of.

Given the terrible performance of DOE and its contractor, SEA/Apogen, it is no surprise that the contract for SEA/Apogen’s services is highly irregular and improper. The GSA OIG concluded that SEA/Apogen’s work in two of the three task orders, worth $23.4 million, were “clearly outside the scope of the underlying …IT services contract.” The GSA OIG further notes that this work “should not have been fully charged to the IT fund.” In addition, the GSA OIG also uncovered that nurses preparing compensation cases were being billed to the government at a rate of $87.84 per hour, but this work was buried in the “Senior Management Analyst” labor category. That hourly rate comes out to more than $175,680 per nurse per year. Based on the costs paid out, and the abysmal results to date, it does not appear that the taxpayers are receiving their moneys worth.

While the complexities of government contracting often allow bureaucrats to muddy the waters, this situation is really quite simple. SEA/Apogen specializes in Information Technology (IT) work, and it was hired, via the GSA, by the Navy’s Space and Naval Warfare Systems Command Information Technology Center (SPWAWAR ITC) in New Orleans to conduct IT work. Then, DOE avoided competitive bidding for its EEOICPA program and hired SEA/Apogen directly from the Navy under a Memorandum of Agreement (MOA). However, SEA/Apogen’s work for DOE quickly transformed from IT services to hiring nurses and clerks to prepare cases for review by Physicians Panels to determine if there was a causal relationship between an illness and exposure to toxic substances in a DOE nuclear facility – essentially, medical evaluations of worker compensation files, a completely different task than IT work. This transformation placed SEA/Apogen’s work outside the scope of its contract with the government.

In simple terms, the payments to SEA/Apogen, and the company’s work, were not authorized by the contract, and thus were improper, irregular, and potentially unlawful. If a company, with the complicity of some government officials, is receiving taxpayer funds for work that is not allowed by its contract, then the company and government officials are potentially violating the contract or even making false claims against the government. Government contracts, and the contracting process, are governed by laws, rules and regulations. When a company does not follow these laws, rules and regulations, it seems the company is violating them.

DOE correspondence with the Navy’s SPAWAR ITC in New Orleans admits as much. In a May 20, 2004 letter, Tom Rollow, Director of the Office of Worker Advocacy at DOE, disclosed that only 20% of SEA/Apogen’s work on EEOICPA is IT work, implying that the remaining 80% of the work is worker compensation evaluations under a medical rubric.

Over the course of several years, SEA/Apogen repeatedly went back to the federal government for more money to do its work, and the government complied. The most recent information available earlier this year put the current payments to SEA/Apogen at about $18 million, but the amount has surely increased since that time. Little thought was given to actual, tangible results, as the statistics referred to earlier demonstrated.

Captain Peggy Feldmann, Commanding Officer of the Navy’s SPAWAR ITC, took the right step in April of this year by informing DOE that it will have to find a new contractor and may no longer use SEA/Apogen. The Navy’s SPAWAR ITC also will cut short its own contract with SEA/Apogen and will accept bids from companies for the IT services contract.

However, I am further alarmed and troubled to learn that DOE is now considering SEA/Apogen as one of ten candidates for a new DOE contract for claims processing services to be awarded at the end of September 2004. Apparently, some people think that there are no consequences.

I ask each of you independently to examine the following issues and answer the following questions:

1) What legal or financial consequences, if any, are there for the GSA OIG finding that a majority of SEA/Apogen’s work was outside the scope of its contract with the government?

2) What efforts were made or are being made, if any, to have SEA/Apogen and DOE follow both the spirit and the letter of the contract, as well as, contracting rules, regulations and laws?

3) Please explain whether laws and regulations permit payment to a contractor for work performed outside contract authority and in the absence of appropriate modification of the contract. Please state whether the SEA/Apogen contract was ever modified to bring the work within scope. If so, please provide the documents for any such modification, and identify the individuals responsible for authorizing the modification.

4) Given that such a large portion of SEA/Apogen’s work for DOE was outside the scope of the IT contract, was this a violation of the Federal Acquisition Regulations? If so, which regulations? Was there a violation of 48 CFR 8.402(f)? Which agency or agencies, and which individual(s) within the agency(ies), are responsible for enforcing compliance with the federal acquisition regulation(s) in this matter?

5) Given that such a large portion of SEA/Apogen’s work for DOE was outside the scope of the IT contract,

(a) What right, if any, did SEA/Apogen have to receive reimbursement from the government for providing EEOICPA claims processing services to the GSA, DOE or the Navy?

(b) What representations were made by either the government or SEA/Apogen, and by which individuals, that claims processing services were authorized for sale to the US government in the absence of a lawful contract for such services?

(c) If no legal authority existed for SEA/Apogen to sell claims processing services under the IT contract, do the invoices submitted by SEA to the U.S. Government or its agencies for these services constitute false claims? If not, why not?

(d) What consequences should or could apply to future government contracting work related to EEOICPA by SEA/Apogen due to the fact that the company may have obtained a competitive advantage through improper, irregular and potentially unlawful contracting arrangements?

6) Given that such a large portion of SEA/Apogen’s work for DOE was outside the scope of the IT contract, does DOE have legal authority to continue, at the present time, to procure such services under this contracting vehicle in the absence of modification to the contract? If not, what steps should be taken and by whom?

7) A DOE-Navy Memorandum of Agreement (MOA) permitted DOE to acquire services under an existing Navy Blanket Purchase Agreement (BPA) with SEA/Apogen. Given that such a large portion of SEA/Apogen’s work for DOE was outside the scope of the IT contract, did the DOE-SPAWAR Interagency Agreement comport with the requirements of the Economy Act and its implementing regulations regarding services eligible for inclusion under that MOA and the circumvention of FAR competition and publication requirements?

8) Given that such a large portion of SEA/Apogen’s work for DOE was outside the scope of the IT contract, did/does GSA or any other agency have any legal authority to issue payments to SEA/Apogen for EEOICPA claims processing services? If not, should GSA or any other agency cease such payments and seek to recover such payments to the extent they are outside of the scope of the contract? Also, does the government have recourse to recover any portion of taxpayer dollars and/or profits that SEA/Apogen derived from this arrangement? I note that the Program Fraud Civil Remedies Act of 1986 (PFCRA), 31 U.S.C. §§ 3801 through 3812, establishes an administrative remedy against any person who makes a false claim or written statement to any of certain federal agencies. Is this or the False Claims Act applicable to the circumstances in this case?

9) What steps, if any, are each of you taking to ensure the problem uncovered by the GSA OIG does not happen again, and to hold the responsible officials accountable?

10) DOE has listed SEA/Apogen – Doug Chandler is listed as the contact – on its “Source List” of 10 companies invited to submit bids for EEOICPA claims processing in connection with a July 16, 2004 Request for Proposal. Given the findings of the GSA OIG, why has SEA/Apogen been solicited to bid (either alone or in a teaming arrangement with another DOE contractor), on the contract DOE is planning to issue to process worker compensation claims, and why is SEA/Apogen eligible to make a bid, which was due on August 13, 2004, on this contract? Are there plans to award the contract to a company with the understanding that SEA/Apogen will be hired as a subcontractor to perform the work?

11) Is it appropriate for DOE, in the course of procuring services for EEOICPA claims processing, to limit the potential sources of contract services to only those entities on the GSA Federal Supply Schedule, even if there are entities which are not on the Federal Supply Schedule but may be more qualified to perform the services in the most efficient and effective manner?

The GSA OIG finding on this contracting scheme is a serious matter in any number of ways. An agreement between a private company and the government appears to have been violated. The GSA failed to police activities under the contract and ensure the contract was complied with. Millions in taxpayer money was misappropriated when it was paid out to a private company that did not stay within the boundaries of its contract. At the same time, as the statistics of DOE and records of SEA/Apogen show, exorbitant amounts of money was paid for low-quality and slow services, resulting in barely a dent in the pile of thousands of claims that need to be processed. Government officials in three agencies either knew about the violation and allowed it, or were too negligent to detect and stop it. And most importantly, this scheme was of no help to those people for whom the entire EEOICPA program was created: sick former nuclear weapons plant workers.

I request that each of you respond with the requested information by Friday, August 27, 2004. Thank you.

Sincerely,

Charles E. Grassley

Senator